Jaeger v. Hardy

• Decision Date: 05 May 1891
• Citation: 48 Ohio St. 335,27 N.E. 863
• Parties: JAEGER v. HARDY et al.
• Court: Ohio Supreme Court

27 N.E. 863

48 Ohio St. 335

JAEGER v. HARDY et al.

Supreme Court of Ohio.

May 5, 1891

Error to circuit court, Cuyahoga county.

The defendant J. H. Hardy, on the 1st day of April, 1873, was the owner in fee simple of a parcel of land known as ‘ Lot No. 2’ of James H Hardy's subdivision of part of lot No. 330, in Newburgh township, Cuyahoga county; and no that day he entered into a written contract for the sale of the same to the defendant E. M. Dixon, for $1,350, which sum Dixon agreed to pay, as follows: $100 on or before the 10th of April, 1873; $50 on or before May 10, 1873; and the balance in 12 semi-annual payments, of $100 each, with interest from April 1, 1873. Dixon also agreed to pay all taxes and assessments that should be levied on the premises after the date of the contract. Hardy bound himself by the contract to make and deliver to Dixon a good and sufficient deed for the premises upon the payment of the purchase money interest, taxes, and assessments; and the contract further provides that he may, at any time before full payment, tender a deed, in which event Dixon was to give his notes, secured by mortgage on the premises, for the then unpaid balance of the purchase money. Upon the execution of the contract, Dixon entered into the possession of the premises, and has continued in possession ever since, cultivating the same, and making some small improvements. On the 8th day of August 1874, Hardy executed his promissory note to the plaintiff Frank Jaeger, for the sum of $1,200, payable to his order, in one year thereafter, with 8 per cent. interest; and at the same time, to secure its payment, gave him a mortgage in due form on the lot described in the Dixon contract. Hardy's wife joined in the mortgage, releasing her right of dower. The mortgage was duly filed for record on the 13th of August 1874, and properly recorded. The note not having been paid, the plaintiff, on the 1st day of March, 1884, commenced his action in the court of common pleas of Cuyahoga county, to foreclose the mortgage, making Hardy and his wife, and Dixon and his wife, parties defendant. The petition is in the usual form, and its averments are sufficient to entitle the plaintiff to the relief sought. It also alleges that Dixon claims to have some title to the premises, and prays that he may be required to set it up or be forever barred. Hardy pleaded usury in the note. Dixon filed a separate answer, in which he set up his contract of purchase, and his possession under it; alleging that the plaintiff had full knowledge of the contract and possession when he took his mortgage. This answer also contains the following averment: ‘ The defendant, further answering, says that he had paid upon said contract for said land to said Hardy, before he had knowledge that said mortgage was placed on said property, the sum of $650, and interest, which amount he is entitled to have paid back to him before said mortgage shall be paid; and he avers that said sum so paid is a first lien upon said property, and superior to the lien, or pretended lien, of the plaintiff.’ The reply controverts the allegations of both answers, and alleges that Dixon had notice of the mortgage from the time he commenced dealing for the land, and that, if he paid anything on his contract to Hardy, he paid with full knowledge of the mortgage, and of plaintiff's rights. The cause, having been appealed to the circuit court, was there submitted upon an agreed statement of the facts, which, so far as they relate to the contract of sale to Dixon, and his possession of the premises under it, and to the execution and record of the plaintiff's mortgage, are as above stated. The further facts contained in the agreed statement are that there is due to the plaintiff on the note executed to him by Hardy the sum of $1,215.23, with 8 per cent. interest from the 1st day of June, 1880; that the plaintiff did not examine the premises when he took the mortgage; that Dixon ‘ never knew that Hardy had placed a mortgage on said premises until he came to settle with him in March, 1876; that on the 25th day of March, 1876, Dixon made his last payment upon said contract, at the office of Mr. Brand, in Cleveland, and that payment was $700, and at the time he paid Hardy said $700 Hardy promised to have the Jaeger mortgage canceled by the following Monday. It was only a few days before that he first discovered that said half of said sublot had a mortgage upon it given to the plaintiff by Hardy. Relying upon the promise of Hardy to cancel the mortgage, he paid said amount, and took Hardy's warranty deed.’ Mrs. Dixon holds a tax lien on the premises for $17.25, with interest from January 20, 1883, which, with the taxes paid since, constitute the first lien thereon. The circuit court held that, upon this state of facts, the plaintiff was not entitled to a decree of foreclosure. His petition was dismissed, and judgment was rendered against him for the costs. His motion for a new trial was overruled, to which he duly excepted, and he prosecutes error here to reverse that judgment.

Syllabus by the Court

1. Possession of lands by a vendee is constructive notice of his contract of purchase, and of his equity in the land.

2. He is not bound to examine the records for subsequent incumbrances of the land by his vendor, nor is the record notice thereof to him.

3. A mortgage on the lands, executed by the vendor while the purchaser is in possession, is subordinate to his rights under the contract; and, until actual notice of the mortgage, the purchaser may safely continue to make payments of the purchase money to his vendor.

4. Such mortgage is, however, a valid lien on the interest remaining in the mortgagor at the time of its execution, which, before conveyance, is the legal title and a beneficial estate in the land to the extent of the unpaid purchase money; and payments made on the purchase money to the vendor, after the purchaser has notice of the mortgage, will be unavailing as against the mortgagee.

5. In order to charge the purchaser with notice of the mortgage, it is not essential that the information be received from the mortgagee. If it is derived from a source entitled to credit, and is distinctly brought to the knowledge of the purchaser, it will be as effectual and binding as if it came directly from the mortgagee.

6. Notice that the mortgage is uncanceled is sufficient to put the purchaser upon inquiry, and to charge him with knowledge of such facts concerning the mortgage, and the indebtedness secured by it, as diligent inquiry would discover.

Wilson & Sykora , for plaintiff in error.

George A. Groot , for defendants in error.

WILLIAMS, C. J., (after stating the facts as above .)

Possession of lands by a vendee under a contract for their...